Tesla (TSLA) Stock Has Its Worst Day, It Crashes Another 21% on Tuesday, Valuation Drops Over $150 Billion in One Week

UTC by Bhushan Akolkar · 3 min read
Tesla (TSLA) Stock Has Its Worst Day, It Crashes Another 21% on Tuesday, Valuation Drops Over $150 Billion in One Week
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Tesla registered its worst single-day drop in history wiping out over $88 billion from its market cap. The S&P 500 Index Committee skipped TSLA stock in its inclusion to the index that led to negative market sentiment.

Electric car maker and automobile giant Tesla Inc (NASDAQ: TSLA) witnessed a massive rally this year with its stock price surging over 400% during H1 2020. However, since the beginning of September, TSLA stock has entered a deep correction. On Tuesday, Tesla share price tanked a whopping 21% registering its worst single-day loss in history. Tuesday fall of Tesla stock alone eroded a massive $88 billion from the company’s valuation. Since September 1, the TSLA stock price has tanked more than 350% losing over $150 billion in market cap.

Tuesday’s crash in TSLA stock followed after the S&P 500 Index Committee called short of adding Tesla to the index. With Tesla reporting its fourth-consecutive profits in Q2 2020, investors have been betting big on TSLA’s entry to the S&P 500. Last Friday, the S&P 500 Index committee decided to add Etsy, Catalent, and Teradyne to the index. However, there’s was no word about Tesla’s inclusion. In an email to MarketWatch, Wedbush analyst Dan Ives wrote:

“Tesla not getting into the S&P 500 club is a head scratcher and the stock will likely be down for the indexing implications”.

Investors reacted negatively to this news on Tuesday, following the Labor Day holiday on Monday. Tesla’s fall comes amidst the correction in the broader markets as the tech sector continues to drag the markets down. This massive bull-run in Tesla and the tech sectors had got analysts thinking that they have reached unsustainable valuations. Baird analyst Ben Kallo has kept hopes alive of Tesla’s inclusion to S&P 500.

“Unclear why [Tesla] was not included in the recent rebalancing cycle, though we do think the stock will eventually be added to the S&P 500, having fulfilled all inclusion criteria.”

Tesla Completed $5B Share Sale which Could Have Boosted Its Valuation and Musk’s Wealth

Last week, the automobile giant completed the sale of its $5 billion shares as announced previously. At the end of August 2020, Tesla split its stock in 5-1, after which the stock again saw a good run-up. However, it started falling soon after Baillie Gifford, the company’s largest outside stakeholder trimmed his stake in the company.

Despite this massive correction in such a short time, Tesla continues to lead the automobile industry. Currently, Tesla’s market cap is more than the combined market cap of Toyota Motor Corp (NYSE: TM), General Motors Company (NYSE: GM), Ford Motor Company (NYSE: F), and other giants.

The latest correction in the Tesla (TSLA) stock has also eroded Elon Musk‘s wealth massively. On Tuesday alone, $16.3 billion were wiped-put of Elon Musk’s net worth. Elon Musk is still the fifth richest person in the world with an estimated net worth of $82.3 billion.

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